DEBENTURES |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBENTURES |
10. DEBENTURES
On June 30, 2022, the Company executed the definitive agreements (the “Purchase Agreements”) with arm’s length accredited institutional investors (the “Investors”) for $14,025,000 in debentures with a 10% original issue discount for gross proceeds of $12,750,000 (“First Tranche Debentures”). The First Tranche Debentures were convertible into common shares at $11,100.00 per share. In addition, the Investors received 822 warrants at a strike price of $12,210.00, which expire on December 31, 2025 (the “First Tranche Warrants”). The First Tranche Warrants and First Tranche Debentures each have down round provisions whereby the conversion and strike prices will be adjusted downward if the Company issues equity instruments at lower prices. The First Tranche Warrants strike price, and the First Tranche Debenture conversion price will be adjusted down to the effective conversion price of the issued equity instruments. The transaction costs incurred in relation to first tranche were $1,634,894. The Debentures are senior to all other indebtedness or claims in right of payment, other than indebtedness secured by purchase money security interested.
The Investors had the right to purchase additional tranches of $5,000,000 each, up to a total additional principal amount of $33,000,000.
On January 17, 2023, the Investors purchased additional debentures totaling $5,076,923 with a 10% original issue discount for gross proceeds of $4,615,385 (the “Second Tranche Debenture”). The Second Tranche Debentures were convertible into common shares at $6,200.00 per share and the Investors received an additional 532 warrants at a strike price of $6,200.00, which expire on December 31, 2025 (the “Second Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First Tranche Debentures and the First Tranche Warrants to $6,200.00. The transaction costs incurred in relation to second tranche were $325,962.
On June 26, 2023, the Company entered into waiver and amendment agreements (“Debenture Modification Agreements”) with the Investors to modify terms of the Purchase Agreements. The Debenture Modification Agreements provide as follows:
On August 9, 2023, the Company entered into another waiver and amendment agreement (“Agreement”) with the Investors with respect to a certain Senior Convertible Debenture (the “Debentures”) due July 17, 2025 issued by the Company to that Investor. The Agreement provides as follows:
On October 18, 2023, the Investors purchased additional debentures totaling $2,750,000 with a 10% original issue discount for gross proceeds of $2,500,000 (the “Third Tranche Debenture”). The Third Tranche Debentures were convertible into common shares at $262.00 per share and the Investors received an additional 6,202 warrants at a strike price of $262.00, which expire on April 18, 2027 (the “Third Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First and Second Tranche Debentures and the First and Second Tranche Warrants to $262.00. The transaction costs incurred in relation to third tranche were $31,915.
On November 30, 2023, the Investors purchased additional debentures totaling $2,750,000 with a 10% original issue discount for gross proceeds of $2,500,000 (the “Fourth Tranche Debenture”). The Fourth Tranche Debentures were convertible into common shares at $90.00 per share and the Investors received an additional 19,861 warrants at a strike price of $90.00, which expire on May 30, 2027 (the “Fourth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second and Third Tranche Debentures and the First, Second and Third Tranche Warrants to $90.00. The transaction costs incurred in relation to fourth tranche were $30,040.
On February 21, 2024, the Investors purchased additional debentures totaling $1,100,000 with a 10% original issue discount for gross proceeds of $1,000,000 (the “Fifth Tranche Debenture”). The Fifth Tranche Debentures were convertible into common shares at $21.40 per share and the Investors received an additional 33,411 warrants at a strike price of $23.54, which expire on August 21, 2027 (the “Fifth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third and Fourth Tranche Debentures and the First, Second, Third and Fourth Tranche Warrants to $21.40. The transaction costs incurred in relation to fifth tranche were $50,000.
On April 11, 2024, the Investors purchased additional debentures totaling $550,000 with a 10% original issue discount for gross proceeds of $500,000 (the “Sixth Tranche Debenture”). The Sixth Tranche Debentures were convertible into common shares at $16.30 per share and the Investors received an additional 21,933 warrants at a strike price of $18.00, which expire on October 11, 2027 (the “Sixth Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third, Fourth and Fifth Tranche Debentures and Warrants to $16.30. The transaction costs incurred in relation to sixth tranche were $31,309.
On May 22, 2024, the Investors purchased additional debentures totaling $833,000 with a 10% original issue discount for gross proceeds of $750,000 (the “Seventh Tranche Debenture”). The Seventh Tranche Debentures were convertible into common shares at $10.00 per share and the Investors received an additional 54,145 warrants at a strike price of $11.00, which expire on November 22, 2027 (the “Seventh Tranche Warrants”). The issuance of the additional tranche triggered the down round provision, adjusting the exercise prices of the First, Second, Third, Fourth, Fifth and Sixth Tranche Debentures and the First, Second, Third, Fourth, Fifth and Sixth Tranche Warrants to $10.00. The transaction costs incurred in relation to seventh tranche were $3,154.
On January 16, 2025, institutional investors purchased additional debentures totaling $7,700,000 with a 10% original issue discount for gross proceeds of $7,000,000 (the “January 2025 Debenture”). The January 2025 Tranche Debentures were convertible into common shares at $2.62 per share and the Investors received an additional 1,910,306 warrants at a strike price of $2.882 (the “January 2025 Warrants”). The issuance of the additional tranche triggered the round down provision, adjusting the exercise price of the First, Second, Third, Fourth, Fifth, Sixth, and Seventh Tranche Debentures and First, Second, Third, Fourth, Fifth, Sixth, and Seventh Tranche Warrants to $2.62. The transaction costs incurred in relation to January 2025 tranche were $290,000 ($145,000 paid as of March 31, 2025).
On March 21, 2025, Investors purchased an additional tranche of $1,320,000 with a 10% original issue discount for gross proceeds of $1,188,000 (the “March 2025 Tranche Debenture”). The March 2025 Tranche Debentures were convertible into common shares at $1.99 per share and the Investors received an additional 431,159 warrants at a strike price of $1.99 (the “March 2025 Warrants”). The issuance of the additional tranche triggered the round down provision, adjusting the exercise price of the First, Second, Third, Fourth, Fifth, Sixth, Seventh, and Eighth Tranche Debentures and First, Second, Third, Fourth, Fifth, Sixth, Seventh, and January 2025 Tranche Warrants to $1.99.
During the year ended December 31, 2024, the Investors converted the full principal balance of the Third, Fifth, Sixth and Seventh Tranche Debenture which resulted in extinguishments of the existing debts (see below).
The First, Second, Third, Fourth, Fifth, Sixth and Seventh Tranche Debentures (the “Debentures”) have an interest rate of 5% for the first 12 months, 6% for the subsequent 12 months, and 8% per annum thereafter. Principal repayments will be made in 25 equal installments which began on September 1, 2022 for the First Tranche Debentures, July 1, 2023 for the Second Tranche Debentures, January 1, 2024 for the Third Tranche Debentures, May 1, 2024 for the Fourth Tranche Debentures, August 1, 2024 for the Fifth Tranche Debentures, October 1, 2024 for the Sixth Tranche Debentures and November 1, 2024 for the Seventh Tranche Debentures. The Debentures may be extended by nine months at the election of the Company by paying a sum equal to nine months’ interest on the principal amount outstanding at the end of the 18th month, at the rate of 8% per annum.
The January 2025 and March 2025 Tranche Debentures (the “2025 Debentures”) have an interest rate of 5% for the first 12 months, and 8% per annum thereafter. Principle repayments will be made in 25 equal installments which begin on April 1, 2025 for the January 2025 tranche and July 1, 2025 for the March 2025 Tranche Debenture. The maturity dates are January 17, 2026 and March 21, 2026 for the January 2025 tranche and March 2025 tranche respectively, at which time the outstanding debt balance is due. The 2025 Debentures may be extended by six months to July 16, 2026 for the January 2025 Tranche Debentures, and September 21, 2026 for the March 2025 Tranche Debentures at the election of the Company by paying a sum equal to six months interest at the principal amount outstanding at the end of the 12th month, at the rate of 8% per annum.
The following table summarizes our outstanding debentures as of the dates indicated:
During the three months ended March 31, 2025, the Investors converted $21,860 of interest (March 31, 2024 - $92,880) into shares of the Company resulting in a $86,563 (March 31, 2024 - $272,732 loss) gain on the conversion of convertible debentures. During the three months ended March 31, 2025, the Company incurred $971,343 (March 31, 2024 - $1,364,205) in accretion interest and made $135,260 of cash repayments (March 31, 2024 - $668,568). of principal (March 31, 2024 – $ ) and $
During the three months ended March 31, 2024, the Investors converted $ of the First and Second Tranche Debentures into shares of the Company. The conversions were determined to be an extinguishment of the existing debt and issuance of new debt. As a result, the Company recorded a loss on debt extinguishment in the amount of $ .
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